The Quest: Energy, Security, and the Remaking of the Modern World

by Daniel Yergin

  Thereafter, the entire nation was to be preoccupied with reunification—the difficult incorporation of a ramshackle, dilapidated East Germany into a West Germany that had a vastly higher standard of living. Unification would end up a trillion-dollar-plus project.

  As their part in reunification, the West German electric utilities focused on integrating East Germany’s power system and modernizing its generation, which was based on a type of coal called lignite. While they were preoccupied with the East, a diverse coalition representing a new kind of movement was stealthily promoting a renewable energy law whose adoption was “almost accidental.” And so, as it turned out, the opening of the Berlin Wall also opened a door that turned Germany into the world’s leader in renewable energy for a decade, and as such, did much to lay the basis for today’s global renewable energy industry.16

  At the tip point of this environmental coalition was the Green Party. The Greens had emerged in the late 1970s to protest the environmental degradation that had come with Germany’s economic miracle—polluted rivers, dirty air, and later, of special significance, ecological damage to forests. One thing that unified the entire movement was opposition to nuclear power. The movement also encompassed a New Left, anticapitalist, anti-American strain.

  Indeed, what really mobilized the Green movement and helped turn it into a political party was, in the early 1980s, the proposed deployment of new nuclear weapons in Europe and then American missiles in Germany, which were intended to counterbalance new Soviet missiles. Ronald Reagan became the perfect foil, and vast anti-Reagan and anti-American demonstrations across Germany established the Greens as a real political force.

  In April 1986 came the terrible nuclear accident at Chernobyl. The winds blew westerly from Soviet Ukraine, carrying radiation toward Central Europe, stirring alarm and even panic, and fueling antinuclear activism in Germany and other countries. This fueled lasting antinuclear opposition across the German political spectrum. Former German Chancellor Gerhard Schroeder recalled that the real turning point in coalescing opposition to nuclear power was in 1986. “For me, it was the catastrophe at Chernobyl,” he said. “Mothers of young children kept them inside and did not send them to kindergarten. You need the support of society, and we had it.” In the aftermath of the accident, the Greens gained great credibility, and, in 1990, for the first time, they won seats in the Bundestag.

  Renewable energy was at the top of their agenda. But they were not alone. The environment leader for the Social Democrats was Hermann Scheer, a former researcher on the nuclear fuel cycle, and many years later to be celebrated by Time magazine as a “solar crusader” of the “Green Century.” He opposed nuclear power on the grounds that the world should not depend on “an electricity source which cannot be allowed to make a major failure.” His aim became “to introduce a new paradigm into the energy policy,” beginning with a new type of energy law.

  In the late 1980s a few cities began to experiment with what would become known as the feed-in law—or “feed-in tariff”—which ranks with PURPA for its central importance in creating the economic basis for the modern renewables industry. Germany’s feed-in tariff gave the renewables industry its first commercial scale, bigger than in Japan. The feed-in tariffs set prices that subsidized renewable generators.

  One of the pioneers in the town of Hamelburg was a high school physics teacher named Hans-Josef Fell, who had been convinced by the 1972 Club of Rome study Limits to Growth that the world would soon start running out of resources. “Most people thought the feed-in tariffs were much too expensive, and that a crash would happen,” said Fell. “Our argument was that you needed a market. You needed private capital.”

  In 1990 Fell and the other Greens won election to the Bundestag. They collaborated with Scheer and his faction of the Social Democrats to broaden the feed-in tariffs. To do so, they formed an unlikely alliance with conservative members of the Bundestag, who represented small hydro generators in Bavaria that were frustrated that they could not sell their power into the grid. Scheer and Fell took advantage of the general preoccupation of unification with the East to maneuver their plans into law.

  “The German utilities were totally concentrated on East Germany,” said Scheer. “They could not imagine how our program could succeed, and they did not take it seriously. They started to organize, but they were too late.”

  This feed-in tariff was notable not only for what it did for the renewable industry. It was also the very last law of the West German parliament, before unification came into force on January 1, 1991. “And yes,” said Scheer, “it was, indirectly, the result of the fall of the Berlin Wall.”17

  The Feed-In Law of 1991 borrowed from America, specifically PURPA. Its model required German utilities to buy electricity from renewable generators at higher fixed rates—or very much higher fixed rates—and then subsidize those rates by spreading them across the system so that the costs blended into the overall price. In this way, the otherwise uncompetitive renewable energy would be fed into the grid, and the renewable producers could make a profit.

  By 1993 wind turbines were going up across Germany. In 1998 national elections took the Greens from opposition and sent them into a new ruling Red-Green coalition government with the Social Democrats. Renewables, at the insistence of the Greens, were a key part of the coalition agreement. “I have to say that the Green Party pushed the Social Democrats to see that this was a need,” said Schroeder, who became chancellor in the new coalition. “It was a ten-year discussion.”

  In turn, the coalition pushed through the more aggressive Renewable Energy Law in 2000. The rates varied according to the technology. Photovoltaics received the most preferential feed-in rates, as much as seven times that of conventional electricity. Again, the costs were spread out across the entire system, with power companies passing on the extra costs to customers.

  “With the law supporting the use of renewable energy,” said Schroeder, “we forced the electricity companies to accept renewable energies. That was the main step.”18

  Two years later the governing coalition—reaching back to the origins of the Greens and the impact of Chernobyl—adopted a program to phase out all nuclear power, currently providing over a quarter of Germany’s total electricity. This provided a further urgency to the development of renewables.

  Wind, with over 90 percent of the new renewable capacity, has been by far the biggest winner from the feed-in laws. But Germany also became the world’s biggest market for photovoltaics. The feed-in tariffs, said one solar executive, have “basically been a turbocharger.” The development of high feed-in tariffs in other countries, notably Spain, has similarly stimulated very significant renewable development.19

  Critics said that the subsidies in the feed-in tariffs were excessive and that as the volume of subsidized renewables increases, the costs would eventually lead to a consumer backlash. They also argued that paying different rates for different forms of renewable power, and even different subrates for different versions of the same technology, was economically irrational. Indeed, some backlash exactly along those lines was to occur.

  Spain instituted particularly generous subsidies for renewables. Eventually, however, the program spun wildly out of control. Far more capacity was built than was targeted, costing the government much more than it ever intended. In the end, the financial burden was simply too much for an overburdened government. In 2008 Spain substantially reduced its feed-in tariffs, and did so again in 2010 amid fiscal austerity brought on by excessive government debt.

  However, the feed-in laws did bring renewable power on much faster than some might have imagined. “No one forecast in 2000 what would happen,” said Hans-Josef Fell. Subsidies of this magnitude and a guaranteed market provided very powerful incentives. In 2009 renewables’ share of German electricity consumption reached 14 percent, exceeding its 2010 goal, and the government raised the renewable electricity target for the year 2020.

  Germany’s feed-in laws also proved popular
outside Germany—indeed, wildly popular. This was particularly true in China, as German feed-in tariffs turned Germany into one of the biggest export markets for China’s fast-growing photovoltaic industry.20

  FROM “SOLAR” TO “RENEWABLES”: RECOVERY AND REBRANDING

  In the early 1990s life began to creep back into the American solar industry. Environmentalism was already firmly established as a political force. The twentieth anniversary of the first Earth Day was marked by Earth Day 1990. Organized with a budget 25 times bigger than the first one, it included events in 3,600 U.S. communities and 140 other countries and mobilized upward of 200 million people for a day of activities around the world. Of more immediate impact was the passage of the Clean Air Amendments of 1990, which gave a major boost to environmental concerns. The administration of George H. W. Bush also restored some of the tax incentives for renewable energy. Solar was once again part of the portfolio.

  “Solar” also got rebranded. Around this time, “solar energy” gave way to “renewable energy” as the all-encompassing term. “It was a response to the visceral antisolar rhetoric of the Reagan years,” said Scott Sklar, who at the time headed the Solar Energies Industry Association. “Specific industries tried to rename themselves so as not to have a target on their heads.” The wind industry wanted its own identity. So did geothermal and ethanol. None of them fit very comfortably under the heading of “solar.” But they were all comfortable under the umbrella of “renewables.” The Bush administration not only put additional money into the Solar Energy Research Institute but also participated in the general rebranding, rechristening it the National Renewable Energy Laboratory, NREL.

  The welcome was even warmer under the Clinton administration. On a hot summer day, Bill Clinton was slated to give a speech on the White House lawn announcing an environmental initiative. Among those invited was Scott Sklar in his capacity as head of the solar trade association. Since it was hot and Sklar is bald—and something of a solar showman—Sklar decided to wear an unusual hat, a cross between a pith helmet and a beanie, with a solar-powered fan. It was only with some difficulty that he was able to persuade the White House guards to let him in. When Clinton caught sight of this odd contraption on the head of one of the guests in the crowd, it caught his interest. The president, to the distress of his staff, made his way over and asked Sklar what it was. Sklar explained. The president said he should have been wearing one too. He pulled out a business card and gave it to Sklar, telling him that if he had any other things like that, he should make a point to drop by the White House.21

  THE STATES AS LABORATORIES

  One of the most important reasons for the rebirth of renewables took place at the state level, bearing out the famous adage of Supreme Court Justice Louis Brandeis that states can serve as the laboratories of democracy. Without a particular innovation introduced by individual states—what are called renewable portfolio standards—it is doubtful that renewable energy in the United States would have seen the growth it has experienced since the new century began.

  These standards—nicknamed RPS—require that utilities’ generation portfolios include a certain amount of renewables by a specified date. The first small steps were in Iowa and Minnesota. But it was not until the late 1990s and early years of this century that a number of states imposed renewable standards. In many of the states, these portfolios were largely driven by the growing concern about climate change.

  That was not the case in Texas. In fact, climate change was deliberately not part of the discussion there at all. The main reasons were anxieties about the adequacy of electric power, a desire for diversity, and mounting worries about poor air quality in a number of cities. The RPS was signed into law by Texas Governor George W. Bush in 1999. The RPS provision turned out to be wildly successful in stimulating wind development, more so than anyone had imagined, setting off what became known as the Texas Wind Rush. The state had excellent wind resources, the requirements encouraged scale, and federal tax credits helped make wind economically competitive. (Indeed, so much wind was developed that, later, the costs of new transmission capacity would become a major issue.)

  By 2011 29 states and Washington, D.C., had renewable portfolio standards in place, and most of the new capacity came on line in the RPS states. The results have been disproportionately weighted to wind. Some of the states have very significant targets: New York at 29 percent by 2015. Illinois, Oregon, and Minnesota all are aiming at 25 percent by 2025. In 2011 Jerry Brown, back as governor of California, signed an ambitious bill lifting the state’s requirement from 20 percent, by 2020, to 33 percent. “You can’t be afraid to be called a moonbeam, weird, deviant, interesting, unexpected,” Governor Brown said as he signed the bill. As he put it, “I didn’t get my name ‘Governor Moonbeam’ for nothing.”

  These standards will continue to be a major driver for renewable power in the United States. They also provide the mechanism for folding higher-cost renewable energy into the overall power portfolio, although some foresee a reaction to rate shock on the part of consumers owing to the higher costs of renewables.22

  CLEANTECH

  The rising prices for energy, beginning around 2003 and 2004, helped propel accelerated growth of, and support for, renewables in the United States. It also, at least for a time, narrowed the cost gap between renewable and conventional energy. Climate change became a much more explicit part of energy policy. As a result of all these factors, investment in renewables increased dramatically. As venture capital began investing in the sector, renewables gained yet another new name—“cleantech.” And providing confirmation that renewables were moving into the mainstream, investment banks established “clean energy” teams and began to distribute cleantech research.23

  But as the Great Recession of 2008 broke, it hit renewables hard. Financing became increasingly difficult to arrange. Moreover, even with the subsequent rebound in prices from the lows of late 2008, renewables were still at a competitive disadvantage.

  This time, however, unlike the 1980s, there was no Valley of Death for the renewable industry. Renewables were now a much bigger industry with a strong constituency, it was international, and it had continuing policy support, including in the United States, energy legislation in 2005 and 2007. By now, renewables really were a global business.24

  THE “THREE DENCHI BROTHERS”

  Japan continued to be preoccupied with its high dependence on energy imports, and more than any other country. MITI—now the Ministry of Economy, Trade and Industry, or METI—continues to play an important role in steering Japan’s industrial policy. It has promoted a very distinctive agenda for renewables. It is the “three Denchi brothers”—or San Denchi Kyodai, as Takayuki Ueda, a vice minister at METI, called them.

  In Japan, fuel cells, solar cells, and batteries are all referred to as “batteries.” METI sees these three technologies as pivotal to its triple mandates of ensuring Japan’s industrial competitiveness, improving energy security through diversification, and tackling the problem of climate change. For each of these devices, new materials and fabrication techniques will be required to improve efficiency and reduce cost. “One day we will reach a point where all our electricity generation is renewables,” says Ueda.

  Japanese companies are laboring methodically to realize this dream, but they are also counting on another METI assumption—that, as Ueda said, cutting emissions by 80 percent will be “almost impossible without those three technologies. The three denchi brothers are very important not only for Japan, but for the world.”25

  GREEN DRAGON

  China has over the last years embraced renewables with a fervor that has pushed it into the lead as a market, as a manufacturer—and as a competitor. In 1973 China had already introduced an agricultural law that called for solar and wind energy. In 1988 the first wind-power project was hooked up to the grid in the far west. Yet for many years renewables were largely considered antipoverty measures for the benefit of the rural poor. By the turn of the century
, renewables were starting to get more serious attention. China also recognized that if it was going to be a player in renewables, it needed to put a priority on acquiring technology and know-how—and on supporting entrepreneurs.26

  The decisive change came with the Renewable Energy Law of 2005, which jump-started renewables in China. A host of factors had suddenly raised the salience of renewables. Rapid economic growth, particularly for heavy industry, was leading to even more rapid growth in energy consumption. The country had been going through its internal energy crisis, with electricity demand outrunning the availability of coal and electricity, resulting in bottlenecks in supply and brownouts in power. Energy security had become an urgent issue for the top leadership because of growing oil imports and rising oil prices. China would soon start becoming an importer of coal as well. “Based on our current consumption, our fossil energy reserve could not support our economy,” said the chief engineer of China’s National Energy Administration. “We were too large now. So China made the decision to accelerate new and renewable technologies. We need to have the golden momentum of economic growth and the green momentum of clean energy.” The “clean” part was very important. Pollution was a pervasive problem throughout the country. Climate change, emissions from burning coal in particular, was becoming an ever more contentious international issue. And it looked as though renewables would become a global growth industry, and China wanted to be at the forefront.27

  The 2005 Renewable Energy Law was followed in 2007 by the Medium- and Long-Term Development Plan for Renewable Energy, which set out specific targets and called for renewables to reach 15 percent of total energy by 2020. With these policies, bolstered by the government’s massive stimulus spending during the global financial crisis, China’s renewable energy moved into high gear. Wind capacity doubled each year between 2005 and 2009.28